Correlation Between Lollands Bank and Fynske Bank

Can any of the company-specific risk be diversified away by investing in both Lollands Bank and Fynske Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lollands Bank and Fynske Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lollands Bank and Fynske Bank AS, you can compare the effects of market volatilities on Lollands Bank and Fynske Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lollands Bank with a short position of Fynske Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lollands Bank and Fynske Bank.

Diversification Opportunities for Lollands Bank and Fynske Bank

0.67

Correlation Coefficient

Lollands Bank  Fynske Bank

Poor diversification

The 3 months correlation between Lollands and Fynske is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lollands Bank and Fynske Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fynske Bank AS and Lollands Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lollands Bank are associated (or correlated) with Fynske Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fynske Bank AS has no effect on the direction of Lollands Bank i.e., Lollands Bank and Fynske Bank go up and down completely randomly.

Pair Corralation between Lollands Bank and Fynske Bank

Assuming the 90 days trading horizon Lollands Bank is expected to generate 0.75 times more return on investment than Fynske Bank. However, Lollands Bank is 1.33 times less risky than Fynske Bank. It trades about 0.23 of its potential returns per unit of risk. Fynske Bank AS is currently generating about 0.1 per unit of risk. If you would invest  55,500  in Lollands Bank on December 2, 2024 and sell it today you would earn a total of  12,500  from holding Lollands Bank or generate 22.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Lollands Bank  vs.  Fynske Bank AS

Lollands Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lollands Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Lollands Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Fynske Bank AS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fynske Bank AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Fynske Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lollands Bank and Fynske Bank

The main advantage of trading using opposite Lollands Bank and Fynske Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lollands Bank position performs unexpectedly, Fynske Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fynske Bank will offset losses from the drop in Fynske Bank's long position.

The idea behind Lollands Bank and Fynske Bank AS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.